2 Responses to QOTD

Watching this process unfold has been amazing. For the past 20 years or so, the Republicans have managed to create their own private branch of macroeconomic theory that rhymes with mainstream economics but adds in completely crazy ideas that make no sense on their own or together. Among them:

1) Cutting taxes pays for itself in increased revenue. Try to find an actual Republican economist who believes this. Even Bush II’s economics advisers don’t buy into that. Despite what their own experts say, this is gospel among Republican politicians.
2) The only way to cut the size of government to cut taxes and draw down revenue. I can almost agree with this, except for the fact that it makes no sense in light of (1).
3) There’s the complete rewriting of history in claiming that the New Deal made the depression worse. Most commonly used is the selection of one outlier data point in an overall downward unemployment trend. Shame.
4) The claim that government spending can’t jumpstart a stalled economy suffering from insufficient aggregate demand. Evidence: The New Deal didn’t do it, World War II did. How they classify war production as anything other than government spending is beyond me.

Most interesting in all of this has been watching Greg Mankiw, who was always a fine economist, twist himself in knots trying to say sensible things while not disagreeing with the insanity that the Republicans are spewing during the stimulus debate. It’s like watching Star Wars Episode III unfold, only with fewer explosions and more internal conflict.

Cutting taxes pays for itself in increased revenue. […] this is gospel among Republican politicians.

You may have hit the nail on the head with the word “gospel”.

As I understand the Laffer curve, the idea is that if taxes are at (or close to) 100%, no one has any money, and no incentive to make any, so government revenue is $0. Hence, you can paradoxically increase revenue by decreasing taxes. But the Laffer curve is at best a teaching tool with limited applicability to messy reality, in which government revenue and economic health depends on much more than a single variable.

But you’re right; it does seem as though Republicans have embraced lower taxes almost as a religious tenet. It has the advantage of sounding good (no one likes paying taxes), and easily rationalizable.

There’s the complete rewriting of history

Greg Mankiw, who was always a fine economist, twist himself in knots trying to say sensible things while not disagreeing with the insanity

Which we also see in religious arguments.

How they classify war production as anything other than government spending is beyond me.

I think that’s due to another Republican tenet: that military might is good, but social programs are bad. “Government spending” is code for “social programs”.